Some lunch room conversations at work indicated that some people seem to have made a killing in at least one of these companies. That got me thinking that the reason I didnt own any of these was because I owned the total stock market funds and wouldn't want to risk individual stocks. But these stock tickers meteoric rise in the past 4 years makes me feel that I missed the bus on these stocks

Yes, I get the argument that owning the total stock market owns portions of AMZN/NFLX/TSLA. But the more I think about these tickers the more I feel that these were not that risky back then. Hindsight bias I suppose.

Does anyone else feel that way? Did anyone else act on similar impulses and purchase stocks like these?

I don't want to divert from the Boglehead philosophy but things do seem beguiling at times

"Never underestimate the ability of a bad situation to get worse...rapidly." Ninegrams

3 comments to your post
a). Yes - I feel I missed out. They did not seem risky sounds like hindsight bias to me. TSLA always looked like their valuation was stretched from the get go. It really underplays TSLA's volatility during it's rise. Amazon is probably the easy one to say it did not feel risky because it is used so much and was able to diversify it's business into the cloud, etc.

B). I bought the growth index about a year ago - I think I am performance chasing - I am fine with that I guess. It is only about 3% and I do not plan to bring it above 5% overall. I think it is my way of placating myself. Really I do not expect it to make a difference over a long period of time.

C). Look back at comparing growth index, value index, TSM from various time points in the 1990s to current with the understanding that Apple's tremendous run happened during that time and it has been part of the growth index. TSM, Growth and Value end up via DCA near the same end result - that tells me it probably does not matter much. Four years is a very short time period to look over - JMO though

Someone observed that you have to take some major roller coaster rides when investing in growth stocks. Said another way, look at some of those charts (on a log scale) for the ones you've mentioned. You will see some deep dives (AMZN took a dive in the early 2000's). Then you may look at some former growth stocks that took similar dives and did not recover so well. So it's not an easy thing to select the stock, understand whether the growth phase is over (is Nike stock just taking a rest?), or continue the ride.

If I were younger I might take a modest percentage and stick it into a few growth stocks. You should do this for the long term, at least 10 years. Maybe the best time to do this is when everything is getting clobbered in a general recession. In the meantime, do your homework.

I do. I'm happy with where I am but I can't help but be jealous. It's tough because I graduated from college in 2008 so since then the market has basically only gone up. It's a lot easier to be a hero when you first start investing in a 9 year old bull market after a 50% crash. At least, I keep telling myself that.

Not that risky? Are you serious? A few years ago Tesla had barely sold any automobiles and was bleeding cash furiously and known for underdelivering (actually, that's largely still true, though the coming expansion to mass market and new plants are closer to reality). Amazon was still on the trajectory of growth but hadn't struck it big with massive Prime subscriptions and web services revenue yet; this was all a possibility but far from a sure thing, and in the past few years it could have been a competitor (a similar service, let's say eBay doing better, one of the foreign competitors, or say Walmart actually getting into gear faster to compete with Amazon online) making Amazon's money and growth now, rather than Amazon. Likewise it could have been Hulu or some other services instead of Netflix, a foreign competitor, others going the HBO route and getting subscribers themselves, less cord cutting than we saw, people using SingTV / Playstation TV / etc. instead, maybe a greater audience for live TV than expected, etc.

All of these were trading at fairly high valuations by any measure back then and are now. Everything can easily change, especially with a recession or other disruption, never mind to the industries as a whole.

I owned AMZN back in 2001-ish for a few years so I could say if I held on to it I would have made a lot of money.
However - I also held a lot of other individual stocks - many of which didn't fare as well. I'm guessing many of your lunch room friends that made some money on AMZN lost money on several other picks (they just don't talk about their losers).
I've never regretted trading in all my individual stock picks for an Index fund.

Last edited by DaftInvestor on Thu Jun 08, 2017 2:54 pm, edited 1 time in total.

That person who made a killing in at one of these stock, is the same person who lost a fortune in another stock. Otherwise that person would know how to predict the future and beat the market consistently which is never heard of!
So next time when they say that, you say "and I beat that person's net gains assuming all his other loses"

"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

Some lunch room conversations at work indicated that some people seem to have made a killing in at least one of these companies. That got me thinking that the reason I didnt own any of these was because I owned the total stock market funds and wouldn't want to risk individual stocks. But these stock tickers meteoric rise in the past 4 years makes me feel that I missed the bus on these stocks

Yes, I get the argument that owning the total stock market owns portions of AMZN/NFLX/TSLA. But the more I think about these tickers the more I feel that these were not that risky back then. Hindsight bias I suppose.

Does anyone else feel that way? Did anyone else act on similar impulses and purchase stocks like these?

I don't want to divert from the Boglehead philosophy but things do seem beguiling at times

Sure, but then to be sure you didn't miss any potential high-flyers you'd need to cover all the numbers on the roulette wheel. TSM does a pretty good job of doing just that.

It is 100% hindsight bias. Here is the proof: Why don't you pick 3 stocks now which are not that risky, and will have similar growth to amzn/nflx/tsla?

pascal wrote:Yes, I get the argument that owning the total stock market owns portions of AMZN/NFLX/TSLA. But the more I think about these tickers the more I feel that these were not that risky back then. Hindsight bias I suppose.

Some lunch room conversations at work indicated that some people seem to have made a killing in at least one of these companies. That got me thinking that the reason I didnt own any of these was because I owned the total stock market funds and wouldn't want to risk individual stocks. But these stock tickers meteoric rise in the past 4 years makes me feel that I missed the bus on these stocks

Yes, I get the argument that owning the total stock market owns portions of AMZN/NFLX/TSLA. But the more I think about these tickers the more I feel that these were not that risky back then. Hindsight bias I suppose.

Does anyone else feel that way? Did anyone else act on similar impulses and purchase stocks like these?

I don't want to divert from the Boglehead philosophy but things do seem beguiling at times

I don't worry about the missed opportunities with not investing in individual stocks. There's a bit of a dichotomy with investing in individual stocks I think: if you invest only fun money you'll probably never make much money even if your company is very successful. However, if you invest a large piece of your portfolio in individual stocks, you're taking a huge gamble. Something I keep in mind is for every Amazon, Netflix, Tesla, etc., there are a whole lot of companies that failed. Trying to pick the next big corporate giant is like trying to buy the next winning lottery ticket. A handful of people succeed whilst everyone else ends up poorer as a result. I don't feel that lucky, so I'm not tempted to try.

TSLA is the only individual stock I've ever owned. I bought it about 4 years ago when the Model S came out and I took a test drive. I was convinced it was the future and bought some stock (not a Model S, sadly). This is before I was a Boglehead and I've never bought another individual stock since. It was really just some play money, about a dozen shares and it's been marinating in my Roth IRA all this time, skyrocketing in value.

If I had it all to do over again, I would not have bought more TSLA or even AMZN or NFLX. I would have been smarter about savings and debt and started investing in VTSAX, VTIAX, and VBTLX earlier and more aggressively.

Some lunch room conversations at work indicated that some people seem to have made a killing in at least one of these companies. That got me thinking that the reason I didnt own any of these was because I owned the total stock market funds and wouldn't want to risk individual stocks. But these stock tickers meteoric rise in the past 4 years makes me feel that I missed the bus on these stocks

Yes, I get the argument that owning the total stock market owns portions of AMZN/NFLX/TSLA. But the more I think about these tickers the more I feel that these were not that risky back then. Hindsight bias I suppose.

Does anyone else feel that way? Did anyone else act on similar impulses and purchase stocks like these?

I don't want to divert from the Boglehead philosophy but things do seem beguiling at times

pascal,

I bought and sold NFLX and AMZN a few times long ago. I lost enough money doing that. That cured me of all those speculations.

I have seen people here suggest that the Boglehead philosphy allows for a small amount of "play money", to gamble on individual stocks. Just not very much. I would agree.

If you combine that with the "hold the stock forever" mentality, you could have a lot of fun as long as you stick to small amounts.

I bought 100 shares of Amazon in 1998 for $4000. Within 18 months it was less than $1000. I just forgot about it. I checked on it once in the 2000s and it was worth even less. And then I didn't check again until 2013 or so! Still have it. Totally dumb luck. :

No. I don't. The only stock I'd own is BRK. Otherwise, keep contributing to S&P500 fund whether it's up or down. I've heard my co-workers talk about trading on TSLA, AAPL. etc, but I also heard they talk about their loss carryover for the last few years.

I made a lot of money on FB, NVDA, and SHOP. I've also lost a lot on P, INVN, and FEYE. A friend of mine once told me (you've probably heard it before) "Bulls make money, bears make money, pigs get slaughtered". IMO owning a little of the whole market is better than trying to hit the jackpot.

Tesla, are you kidding? It's a Potemkin car company that is but a minor political wind-shift away from total evaporation. An eliminated tax subsidy here, a bad report on safety or battery disposals or cup holders, etc., and someone hand Musk a robe because he has no clothes.

Don't believe me? Fine, but my story is at least as plausible as his, and that's the point - you gonna bet your retirement on that?

Here's what I really wanted to say though: Aren't the red-hot FANG, or "flirty thirty" or whatever stocks all ultra-mega caps that make up a small but noticeable percentage of the total market fund?

If you wanted to buy a low-risk retailer 5 or 10 years ago, you may have gone with Sears or Macys. Both are down 70-90%.

Stocks are risky. There is no way to get stock returns without stock risks. A concentrated portfolio doesn't reduce risk - it instead increases it.

You need to have enough stocks that one company bankruptcy won't impact you nuch. For most investors, this is best done through broadly diversified funds. Individual stocks in a portfolio are only acceptable if you own dozens of individual stocks in a buy and hold manner as a small component of an otherwise fund-focused portfolio, in my opinion. Short term speculation is not investing and should be counted as an expense (entertainment budget) instead of as an investment.

The only reason Tsla is so successful is their range. Once the big boys come out with 200 plusmile range electrics with a reasonable price, they will go the way of the edsel. They might still exist as a battery company and sell their batteries to gm, but I just don't believe they will be able to compete.

jcavana1 wrote:Looking back, I don't think the risk/reward for these stocks has ever been good enough for me to invest.

Obviously, I wish I had. But Tesla has still never made money. Their CEO came out recently saying the stock is overpriced. Amazon and Netflix make a tiny amount of profit relative to market cap.

In my opinion all three of these stocks are overpriced. That of course does not mean that they will not continue to soar. But that all could be related to market psychology and not actual value.

This may not be a market bubble but it's starting to smell like one. I've lived through two market bubbles now. I remember back around the 2000 TMT bubble, PBS did a Frontline documentary called "Betting on the Market". They interviewed two old school Wall Street brokers. It was really funny. The one said "Yea, market bubbles come around every twenty years or so." The other said "That's how long it takes to raise another generation of suckers."

Yes I feel I missed out. Only twice did I approach my father about buying stocks. Netflix and Google when they went public. I worked a video chain and saw the writing on the wall when Netflix launched.

I didn't have the money or I would have bought some. He easily could have but chose not to take my advice. I even tried to get him to give me a loan since he always said he would loan me the money to start my own business and came to him with a solid business plan.

My wife bought AMZN and TSLA in her Roth IRA, which is small part of our net worth. When she bought AMZN for about $180 a share several years ago, I told her that it was too expensive and the PE was too high. I said the same thing about TSLA when she bought at $220. I have lost all credibility.

A little. But back before I only bought index funds, I dabbled in individual stocks. Some went up, and so I felt like a deserving genius, and some went down, and so I felt unlucky. I'm pretty sure that is a classic cognitive bias of some sort.

Anyway, one of the ones I bought maybe 10-15 years ago was surely positioned for success in an exciting new industry. The company (Evergreen Solar) eventually went bankrupt, and the stock I bought was renamed some kind of post-bankrupt shares and traded for maybe .01/share. I never tried to clear it out of my account- I wanted it to serve as a reminder to me every time I logged in that my can't-miss idea might well lose every last penny I put into it. About 5 years ago I closed the account at that brokerage and the worthless stock didn't transfer. But looking at it all those years helped drive home the lesson, and now whenever I think thoughts such as the one you posed, I am reminded of that worthless stock staring me in the face, and it helps me be glad I don't gamble with individual tech stocks anymore. I suspect your friends have secretly had more Evergreen Solars than Teslas.

Does anyone else feel that way? Did anyone else act on similar impulses and purchase stocks like these?

No. These things are never as safe or as sure in "real time" as they are in hindsight. Consider right now. What stock seems undervalued compared to your estimate of its potential today? Is it easy to see? I don't think so. For what it's worth, I bought AAPL in 1990 and sold it to buy index funds sometime in the mid 2000's, if I remember right. If I'd known what was going to happen, of course I wouldn't have done that, but I didn't know. Nobody did. Same deal with Amazon, Netflix, Tesla, Google...

Yes and no. I used to work for AMZN, and my initial stock grant was at <$180 valuation. Do I sometimes think about what would've happened if I had held? Sure. Do I regret selling on each vest? Not really - it's my system, and I don't like being overly exposed to the company that signs my paycheck.

I am disappointed particularly because of my job experience lending money to large retailers, I've personally seen the destruction Amazon has caused. Literally every single retailer has been negatively affected by them, so why didn't I buy AMZN?????? It just feels so obvious today.

pascal wrote:Yes, I get the argument that owning the total stock market owns portions of AMZN/NFLX/TSLA. But the more I think about these tickers the more I feel that these were not that risky back then. Hindsight bias I suppose.

My father always fancied himself an excellent stock picker (he wasn't). For my 50th birthday, he gifted me $1500 worth of a fantastic-and-poised-to-rocket-to-the-heavens stock in a company called "KMart". Within a few years the stock was worthless.